Natural Gas Weekly Update

Previous Issues

In the News:

New pipeline expansions come online in the Northeast.

Two major northeast pipeline infrastructure expansion projects came into service at the beginning of this month. The Tennessee Gas Pipeline (TGP) Supply Diversification Project and the National Fuel Gas Northern Access Project together will add about 0.4 billion cubic feet per day of incremental volumes to TransCanada’s Niagara export trading point, according to recent reports by BENTEK Energy LLC (Bentek). The National Fuel Gas Northern Access Project included 320 million cubic feet (MMcf) per day of capacity, while the TGP Supply Diversification Project included 250 MMcf per day of additional capacity. Both came online November 1. As production in the Northeast United States has grown, particularly from the Marcellus, insufficient infrastructure has led to excess supply and depressed prices in some areas. Several major pipeline expansions and new projects are planned in the coming years to help further ease constraints in moving gas out of the Marcellus Shale region.

Overview:

(For the Week Ending Wednesday, November 14, 2012)

Natural gas prices generally registered overall increases for the report week (Wednesday to Wednesday) at many of the country’s trading locations. The Henry Hub price dipped during the early portion of the reporting period before rebounding to close at $3.66 per million British thermal units (MMBtu) yesterday (up 19 cents per MMBtu for the week).

The natural gas futures market trended higher over most of the week. At the New York Mercantile Exchange (NYMEX), the December 2012 natural gas contract gained 18.2 cents per MMBtu to close at $3.760 per MMBtu yesterday.

Prices:

The Henry Hub day-ahead price registered an overall increase for the week, dipping a combined 14 cents per MMBtu on Thursday and Friday, before climbing to close the week at $3.66 per MMBtu, up 5.5 percent. Generally moderate temperatures in many locations helped to lower prices early in the reporting week, with prices finishing the week higher ahead of forecasts of colder weather.

At the NYMEX, the December 2012 contract ended the week up, rising from $3.578 per MMBtu last Wednesday to $3.760 per MMBtu yesterday, an increase of 18.2 cents per MMBtu. Prices dropped early in the report week, falling to $3.503 per MMBtu on Friday, but rose for the balance of the period to finish the week up 5.1 percent. The 12-Month Strip (average of December 2012 to November 2013 contracts) closed yesterday at $3.914 per MMBtu, up 15.4 cents per MMBtu (4.1 percent) for the week.

Certain locations in the Northeast saw prices initially trending significantly lower as much warmer weather followed a Nor’easter that drove temperatures into the thirties early in the reporting week. At the Algonquin Citygate trading point (for delivery into Boston), spot prices started the week at $8.45 per MMBtu, but dropped to $4.52 per MMBtu on Friday before regaining considerable ground on Tuesday and yesterday, closing at $7.37 per MMBtu (down 12.8 percent for the week). Similarly, prices at the Transcontinental Pipeline’s Zone 6 trading point (which serves New York City markets), which began the week at $4.04 per MMBtu, fell to $3.43 per MMBtu on Friday and then rose steadily to finish the report week essentially unchanged at $4.03 per MMBtu (down 0.2 percent).

Total consumption for the report week registered an overall increase, with higher residential/commercial demand offsetting a decrease in demand from the power and industrial sectors. According to estimates from Bentek, domestic natural gas consumption rose by 0.4 percent from last week, driven by an increase of 2.8 percent in residential/commercial sector consumption. Power sector consumption finished the week down 2.3 percent, while industrial sector consumption dipped modestly (down 0.5 percent). Up week-over-week, residential/commercial sector consumption also exceeded levels for the same week last year (by 14.1 percent).

Total supply was down for the week, registering an overall decrease of 0.8 percent, largely reflecting slightly lower dry natural gas production. According to Bentek estimates, domestic weekly dry natural gas production declined 0.4 percent from the previous week’s volumes (yet was 1.8 percent higher than the same period last year). Imports from Canada declined by 6.4 percent, as a decrease in shipments to the Midwest offset increases in the West and Northeast. For the week, imports from Canada stand moderately below year-ago volumes (down 3.4 percent). While liquefied natural gas (LNG) sendout rose 0.8 percent over last week, sendout volumes remain well below (37.6 percent) year-ago levels.

Storage

Working natural gas in storage decreased to 3,911 Bcf as of Friday, November 9, according to EIA’s WNGSR. This represents an implied net withdrawal of 18 Bcf from the previous week, the first withdrawal for this heating season. In contrast, natural gas was still being injected into storage at this time last year and on average over the last 5 years (2007-2011) at a rate of 20 Bcf and 17 Bcf, respectively. Inventories are currently 71 Bcf (1.8 percent) greater than last year at this time and 209 Bcf (5.6 percent) greater than the 5-year average.

Two of the three storage regions posted increases this week, with the West and Producing Regions posting record high natural gas storage volumes. Inventories in the West and Producing regions increased by 3 Bcf (the 5-year average net injection of 3 Bcf) and 2 Bcf (the 5-year average net injection of 10 Bcf), respectively, while the East region posted a decline of 23 Bcf (compared to the 5-year average net injection of 4 Bcf). In the Producing region, working natural gas inventories increased 3 Bcf (1.0 percent) in salt cavern facilities and remained at the previous week’s level in nonsalt cavern facilities.

Temperatures during the storage report week were 1.6 degrees cooler than the 30-year normal temperature and 1.1 degrees cooler than the same period last year. Temperatures in the Lower 48 states averaged 48.0 degrees, compared to 49.1 degrees last year and the 30-year normal of 49.6 degrees. While overall temperatures were less than two degrees cooler than normal, temperatures varied somewhat across Census divisions. In the Northeast, the Middle Atlantic Census division was particularly cool, averaging 7.0 degrees cooler than the 30-year normal. In the West, the Mountain Census division was particularly warm, averaging 8.6 degrees warmer than the 30-year normal. Heating degree-days nationwide were 10.6 percent above normal and 8.7 percent above last year.